Question 1

Scenario 12-1
Suppose Jeremy and Kelsey receive great satisfaction from their consumption of turkey.Kelsey would be willing to purchase only one slice and would pay up to $5 for it.Jeremy would be willing to pay $8 for his first slice, $6 for his second slice, and $2 for his third slice.The current market price is $2 per slice.
-Refer to Scenario 12-1.If a tax of $4 is levied on each slice of turkey,what is the deadweight loss of the tax

Accepted Answer

A)  $3
B)  $6
C)  $8
D)  $9E) A) and B)
F) None of the above

Question 2

The federal government collects about one-half of the taxes in our economy.

Accepted Answer

A) True 
 B)False

Question 3

What is an income tax in which the average tax rate is the same for all taxpayers

Accepted Answer

A)  a progressive tax
B)  a regressive tax
C)  a distortion-free tax
D)  a proportional taxE) B) and C)
F) B) and D)

Question 4

What does tax incidence refer to

Accepted Answer

A)  what product or service the tax is levied on
B)  who bears the tax burden
C)  what sector of the economy the imposed tax most affects
D)  the impact a tax will have on the economyE) B) and D)
F) A) and C)

Question 5

What are taxes on specific goods such as cigarettes,gasoline,and alcoholic beverages called

Accepted Answer

A)  sales taxes
B)  excise taxes
C)  social insurance taxes
D)  consumption taxesE) None of the above
F) A) and B)

Question 6

Vertical equity is not consistent with a regressive tax structure.

Accepted Answer

A) True 
 B)False

Question 7

-Refer to Table 12-8.Which tax illustrates a regressive tax

Accepted Answer

A)  tax A
B)  tax B
C)  tax C
D)  tax DE) C) and D)
F) None of the above

Question 8

What does horizontal equity state that taxpayers with similar incomes should pay

Accepted Answer

A)  taxes based only on their income
B)  exactly the same amount of taxes, regardless of circumstances
C)  similar amounts of tax
D)  taxes based on the benefits received from government servicesE) A) and B)
F) C) and D)

Question 9

While debate over tax policy is complex,how do economists play an important role

Accepted Answer

A)  by arguing for policies that clearly lead to efficiency gains in the economy
B)  by shedding light on the tradeoff between efficiency and equity in tax policy
C)  by articulating the importance of equity as the most important goal of tax policy
D)  by demonstrating that there are no tradeoffs in tax policy: both efficiency and equity can be attained if the tax policy follows basic economic reasoningE) A) and D)
F) None of the above

Question 10

From which source do provincial and local governments NOT generate revenue

Accepted Answer

A)  sales taxes
B)  the federal government
C)  corporate income taxes
D)  customs dutiesE) A) and C)
F) All of the above

Question 11

Which statement best describes tax evasion

Accepted Answer

A)  It is facilitated by legal deductions to taxable income.
B)  It is the same as tax avoidance.
C)  It is recommended by the Canadian Accounting Association.
D)  It is illegal.E) B) and C)
F) A) and C)

Question 12

MaKenna earns income of $80,000 per year.Her average tax rate is 50 percent.MaKenna paid $7000 in taxes on the first $30,000 she earned.What was the marginal tax rate on the first $30,000 she earned,and what was the marginal tax rate on the remaining $50,000

Accepted Answer

A)  16.25 percent and 50.00 percent
B)  18.00 percent and 60.00 percent
C)  20.00 percent and 20.00 percent
D)  23.33 percent and 66 percentE) B) and C)
F) None of the above

Question 13

What does the average tax rate measure

Accepted Answer

A)  the fraction of spending paid in taxes
B)  the fraction of income paid in taxes
C)  the incremental rate of tax on income
D)  the average deadweight loss from all taxesE) B) and C)
F) A) and D)

Question 14

What is one of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity

Accepted Answer

A)  determining whether or not a taxpayer falls within the highest income quintile
B)  determining the level of transfer payments made to low-income groups
C)  determining the source of income for taxpayers
D)  determining what differences are relevant to a family's ability to payE) A) and B)
F) A) and C)

Question 15

When the government taxes labour earnings,what can we expect people to do

Accepted Answer

A)  work more so they can keep the same standard of living
B)  work less and enjoy more leisure
C)  quit their present job and find one that pays better
D)  stop working altogether and go on welfare in protestE) B) and C)
F) C) and D)

Question 16

The federal government collects taxes in a number of ways.Which of the following ranks the following sources of revenue from the largest to the smallest

Accepted Answer

A)  corporate income taxes, GST, personal income taxes, and excise taxes and duties
B)  corporate income taxes, EI payroll taxes, personal income taxes, and excise taxes and duties
C)  personal income taxes, corporate income taxes, excise taxes and duties, and GST
D)  personal income taxes, corporate income taxes, GST, and excise taxes and dutiesE) B) and D)
F) B) and C)

Question 17

When a taxpayer attempts to legally reduce her tax liability,what is she engaging in

Accepted Answer

A)  tax avoidance
B)  tax evasion
C)  a tax return compensation plan
D)  activities outside the intent of tax lawE) All of the above
F) A) and B)

Question 18

What is total taxes paid divided by total income

Accepted Answer

A)  the lump-sum tax liability
B)  the marginal tax rate
C)  the average tax rate
D)  the average consumption tax liabilityE) A) and B)
F) B) and D)

Question 19

What is the ranking of the following provincial and local government expenditure categories from largest to smallest

Accepted Answer

A)  health, education, social services
B)  debt service, health, education
C)  social services, debt service, education
D)  health, social services, educationE) A) and B)
F) A) and C)

Question 20

What happens when interest income from savings is taxed

Accepted Answer

A)  For the poor people, more will be saved than without the tax to make up for what is lost in taxes.
B)  For the rich people, more will be saved than without the tax to make up for what is lost in taxes.
C)  For the rich people, less will be saved than without the tax since tax lowers the return on income.
D)  For the poor people, less will be saved without tax since tax lowers the cost of investment.E) B) and C)
F) A) and D)

Exam 12: The Design of the Tax System

What is the ranking of the following provincial and local government expenditure categories from largest to smallest

Correct Answer
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What does tax incidence refer to

Correct Answer
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Vertical equity is not consistent with a regressive tax structure.

Correct Answer
verified

Which statement best describes tax evasion

Correct Answer
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When the government taxes labour earnings,what can we expect people to do

Correct Answer
verified

What happens when interest income from savings is taxed

Correct Answer
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From which source do provincial and local governments NOT generate revenue

Correct Answer
verified

What does the average tax rate measure

Correct Answer
verified

What are taxes on specific goods such as cigarettes,gasoline,and alcoholic beverages called

Correct Answer
verified

The federal government collects about one-half of the taxes in our economy.

Correct Answer
verified

What does horizontal equity state that taxpayers with similar incomes should pay

Correct Answer
verified

What is total taxes paid divided by total income

Correct Answer
verified

When a taxpayer attempts to legally reduce her tax liability,what is she engaging in

Correct Answer
verified

-Refer to Table 12-8.Which tax illustrates a regressive tax

Correct Answer
verified

MaKenna earns income of $80,000 per year.Her average tax rate is 50 percent.MaKenna paid $7000 in taxes on the first $30,000 she earned.What was the marginal tax rate on the first $30,000 she earned,and what was the marginal tax rate on the remaining $50,000

Correct Answer
verified

What is an income tax in which the average tax rate is the same for all taxpayers

Correct Answer
verified

Correct Answer
verified

While debate over tax policy is complex,how do economists play an important role

Correct Answer
verified

What is one of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity

Correct Answer
verified

The federal government collects taxes in a number of ways.Which of the following ranks the following sources of revenue from the largest to the smallest

Correct Answer
verified

Exam 12: The Design of the Tax System

What is the ranking of the following provincial and local government expenditure categories from largest to smallest

Correct AnswerverifiedShow Answer

What does tax incidence refer to

Correct AnswerverifiedShow Answer

Vertical equity is not consistent with a regressive tax structure.

Correct AnswerverifiedShow Answer

Which statement best describes tax evasion

Correct AnswerverifiedShow Answer

When the government taxes labour earnings,what can we expect people to do

Correct AnswerverifiedShow Answer

What happens when interest income from savings is taxed

Correct AnswerverifiedShow Answer

From which source do provincial and local governments NOT generate revenue

Correct AnswerverifiedShow Answer

What does the average tax rate measure

Correct AnswerverifiedShow Answer

What are taxes on specific goods such as cigarettes,gasoline,and alcoholic beverages called

Correct AnswerverifiedShow Answer

The federal government collects about one-half of the taxes in our economy.

Correct AnswerverifiedShow Answer

What does horizontal equity state that taxpayers with similar incomes should pay

Correct AnswerverifiedShow Answer

What is total taxes paid divided by total income

Correct AnswerverifiedShow Answer

When a taxpayer attempts to legally reduce her tax liability,what is she engaging in

Correct AnswerverifiedShow Answer

-Refer to Table 12-8.Which tax illustrates a regressive tax

Correct AnswerverifiedShow Answer

MaKenna earns income of $80,000 per year.Her average tax rate is 50 percent.MaKenna paid $7000 in taxes on the first $30,000 she earned.What was the marginal tax rate on the first $30,000 she earned,and what was the marginal tax rate on the remaining $50,000

Correct AnswerverifiedShow Answer

What is an income tax in which the average tax rate is the same for all taxpayers

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

While debate over tax policy is complex,how do economists play an important role

Correct AnswerverifiedShow Answer

What is one of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity

Correct AnswerverifiedShow Answer

The federal government collects taxes in a number of ways.Which of the following ranks the following sources of revenue from the largest to the smallest

Correct AnswerverifiedShow Answer

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